War Bonds: Difference between revisions
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==War Bonds== | ==War Bonds== | ||
War bonds were savings bond sold to individuals by the government during World War II. These types of bonds were known as Series E bonds (later replaced by Series EE bonds in 1980) and were first made available for purchase on May 14, 1941 in denominations of $25 up to $10,000. The main function of these bonds was to give funding to the government, however they also served other purposes. | War bonds were savings bond sold to individuals by the government during World War II. These types of bonds were known as Series E bonds (later replaced by Series EE bonds in 1980) and were first made available for purchase on May 14, 1941 in denominations of $25 up to $10,000. They were sold at 75% of face value. The main function of these bonds was to give funding to the government, however they also served other purposes. | ||
== Lowering Inflation == | == Lowering Inflation == | ||
Generally during times of War, the inflation rate rises because goods | Generally during times of War, the inflation rate rises because many goods are not produced for domestic benefit. More money is spent, but less goods are available on the market. The monetary policy for fighting inflation is to decrease the money supply. In a normal economy, the Federal Reserve will sell treasury bonds (to banks) to lower the monetary base. | ||
However, the Federal Reserve does not have power over the sale and purchase of savings bonds purchased by individuals. When Americans purchased war bonds, they were effectively removing money from circulation, therefore lowering the Money Supply. This helped control inflation throughout the war. | However, the Federal Reserve does not have power over the sale and purchase of savings bonds purchased by individuals. When Americans purchased war bonds, they were effectively removing money from circulation, therefore lowering the Money Supply. This helped control inflation throughout the war. | ||
==Selling Bonds == | |||
== | [[Image:Sellingbonds.jpg|thumb|People selling war bonds]] | ||
[[Image:Sellingbonds.jpg| | |||
With the boost in available jobs and higher wages during World War II, the average disposable income was rising. A massive advertising campaign encouraged workers to purchase War bonds to support the War effort. The fact that so many people were willing to forgo their disposable income for cause showed that people had a positive attitude toward the war and felt their investments were safe. Many companies offered payroll deduction plans in exchange for War bonds. Since consumers were not spending their disposable income on goods, the money spent on war bonds became savings. | With the boost in available jobs and higher wages during World War II, the average disposable income was rising. A massive advertising campaign encouraged workers to purchase War bonds to support the War effort. The fact that so many people were willing to forgo their disposable income for cause showed that people had a positive attitude toward the war and felt their investments were safe. Many companies offered payroll deduction plans in exchange for War bonds. Since consumers were not spending their disposable income on goods, the money spent on war bonds became savings. | ||
==Numbers== | ==Numbers== | ||
[[Image:Savings.jpg|left|thumb|300px]] | |||
During World War II, the US government sold $ | During World War II, the US government sold more than $185 Billion worth of War bonds to finance the war. This accounted for over half of the war's $304 billion cost. The enormous spending on war bonds by the people caused a sharp increase in the personal savings rate. In 1944 the personal savings rate was over 25%. This meant that people were willing to not spend over a quarter of their disposable income. In a addition to rationing, war bonds were a major cause of this sharp increase. | ||
Latest revision as of 21:44, 28 November 2007
War Bonds
War bonds were savings bond sold to individuals by the government during World War II. These types of bonds were known as Series E bonds (later replaced by Series EE bonds in 1980) and were first made available for purchase on May 14, 1941 in denominations of $25 up to $10,000. They were sold at 75% of face value. The main function of these bonds was to give funding to the government, however they also served other purposes.
Lowering Inflation
Generally during times of War, the inflation rate rises because many goods are not produced for domestic benefit. More money is spent, but less goods are available on the market. The monetary policy for fighting inflation is to decrease the money supply. In a normal economy, the Federal Reserve will sell treasury bonds (to banks) to lower the monetary base.
However, the Federal Reserve does not have power over the sale and purchase of savings bonds purchased by individuals. When Americans purchased war bonds, they were effectively removing money from circulation, therefore lowering the Money Supply. This helped control inflation throughout the war.
Selling Bonds
With the boost in available jobs and higher wages during World War II, the average disposable income was rising. A massive advertising campaign encouraged workers to purchase War bonds to support the War effort. The fact that so many people were willing to forgo their disposable income for cause showed that people had a positive attitude toward the war and felt their investments were safe. Many companies offered payroll deduction plans in exchange for War bonds. Since consumers were not spending their disposable income on goods, the money spent on war bonds became savings.
Numbers
During World War II, the US government sold more than $185 Billion worth of War bonds to finance the war. This accounted for over half of the war's $304 billion cost. The enormous spending on war bonds by the people caused a sharp increase in the personal savings rate. In 1944 the personal savings rate was over 25%. This meant that people were willing to not spend over a quarter of their disposable income. In a addition to rationing, war bonds were a major cause of this sharp increase.
